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Negative gearing predicted to increase post-Budget

High income earners hit by the Budget Repair Levy could view negatively geared investments as a way to “beat” the new tax, according to HLB Mann Judd.

Those who are now going to be affected by the Budget Repair Levy, with personal income levels over $180,000, might be taking a closer look at investment strategies this year, HLB Mann Judd said in a statement.

“Many may decide that a negative geared property is now the best way to not only beat the levy, but also ensure they reduce their taxable income with legitimate measures as the end of financial year approaches,” the statement said.

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However, HLB Mann Judd Sydney partner, wealth management, Jonathan Philpot said high income earners need to carefully review their situation.

“Negatively geared investments will again be considered by those looked to increase tax deductions and decrease their taxable income [and] property has always been a favourite of many investors, given the comfort with property ownership and the ease of borrowing to purchase a property,” he said.

“However, the greatest trap with negative gearing is looking at it only from a tax perspective and not as a long-term investment. If the underlying growth in a property is not sufficient to make up for the shortfall of negative income, it is not a good investment option,” he said.

Mr Philpot said negative gearing in SMSFs is a more “aggressive” strategy to build your wealth.

“I think where you are talking about business property and business owners, they are able to perhaps put their property into the SMSF and when they are able to control their income, I think [negative gearing] actually does make sense,” he said.